And the winner is...
Winner: Montanaro European Smaller Companies
Montanaro European Smaller Companies Trust (MTE) retains this award, having achieved one of the best net asset value total returns in this awards category in 2019, despite an uncharacteristically lacklustre year for smaller European companies. MTE’s exceptional resilience in 2018 also contributed to its sector-beating three-year NAV total return, confirming the manager’s ability to outperform come rain or shine.
MTE’s managers attribute their success to their unwavering commitment to “quality companies”. Chairperson Richard Curling says: “They must be pro table; have experienced and honest managers; deliver sustainable high returns on capital employed; enjoy high and ideally growing profit margins reflecting pricing power and a strong market position; and provide goods and services that are in demand and likely to remain so.”
Montanaro Investment Management focuses exclusively on European and UK smaller companies. Its14 analysts favour a long-term approach and invest meaningful amounts of their own money in the trust.
Managed by: a team, headed since 2006 by George Cooke
Sector: European smaller companies
3-year NAV total return: 56.6%
3-year share price total return: 87.6%
Average sector discount: 8.8%
Ongoing charges: 1.18%
Focused on quality companies
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European Opportunities Trust (JEO) has also pulled ahead in the good times and generally held up comparatively well in bad times, thanks to its concentrated portfolio of high-quality growth companies. Like other winners, it invests on a bottom-up basis and keeps turnover low.
JEO differs from its sector peers because it includes the UK in its remit. It focuses mainly on larger companies with 10 holdings accounting for around 75% of the portfolio. The highest sector exposures are healthcare, information technology and industrials.
Recent returns have been undermined by a steep fall in the trust’s largest holding, Wirecard, due to accusations (unproven) of fraudulent accounting. Manager Alex Darwall is convinced these will eventually prove false. Another problem holding is cruise operator Carnival, with Covid-19 proving a severe blow.
Darwall had a great record during his 19 years as manager of Jupiter European Opportunities. In autumn 2019, he left Jupiter to set up Devon Equity Management and the mandate to manage the trust followed him. As part of the move, the trust shortened its name and dropped its performance fee, which is a very welcome development.
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